Standard Bank Mozambique’s chief economist, Fáusio Mussá, said yesterday he believes Mozambique will come out of recession in the second quarter of this year, but has revised growth forecasts to lower projections, mainly due to the delay in Total’s gas project.
“Mozambique is likely to come out of recession during the second quarter of 2021, as the country is experiencing a easing of restrictions related to covid-19,” he said in a comment to the PMI index bulletin published by the bank.
The comments came after Standard Bank’s PMI (Purchasing Manager’s Index) rose for the first time in April to reach 51.3 points, above the neutral value of 50 since February 2020, signaling improvements in economic activity after the impact brought about by the pandemic.
The Purchasing Managers’ Index published by Standard Bank results from the responses of purchasing directors from a panel of about 400 companies in the private sector.
In relation to the recent attacks in Mozambique’s northern region, the report mentions a “negative sentiment” and a decline in FDI may be hampering economic recovery in the country for the months to come.
“The base effects explain much of the expected growth, as the situation still points to moderate aggregate demand and negative sentiment, following a series of terrorist attacks that led to a humanitarian situation in the northern province of Cabo Delgado and further delays in the implementation of liquefied natural gas projects “.
These setbacks mean that the medium and long-term growth forecasts have been “revised downwards, due to the expected decline in foreign direct investment, inevitably accentuated, following Total’s declaration of force majeure regarding its project”.
Mussá considers “unlikely” that “the average GDP growth exceeds the population growth that is between 2.5% to 3% per year”.
“This decline in growth prospects has important macroeconomic implications due to the associated fiscal pressures and the implications for the balance of payments,” he highlights.
In summary, the main risks listed for the country are “security challenges, the uncertainty of political responses, covid-19 and climatic events”.
In view of these, the bank predicts that “the US dollar and the metical will end the year with a value of approximately 60.7 [meticais per dollar] in the ‘bullish’ scenario (expansionist), 65.4 in the base scenario and 70, 1 in the ‘bearish’ scenario (with the greatest retraction)”.
The bank points to end-of-year inflation, in the base scenario, of 7.1% in relation to the same period of the previous year, with the GDP recovery forecast to remain low, with an annual growth of only 1.6%.